Charlene Helm

how to read stock charts

A low stock price usually will have a high trading volume as, in many cases, people will be trading after hearing good or bad news about the company. Besides understanding stock charts, there are other analytical tools you should use, and a financial advisor can help you find and benefit from these valuable resources. A breakout occurs when how to read stock charts the stock finally moves out of the trading range to the upside on heavy volume. Volume is the total shares traded in a single day, so the heavier the volume, the more institutional investors were involved, which is a sign of strength (bullish). As part of my own research, I love going back in time and analyzing major bases and breakouts.

how to read stock charts

Cups, double bottoms and flat bases are the main chart patterns that launch big runs. But the best stocks will also typically offer additional buying opportunities as they make their climbs. You can use those entries to add to your existing position or, in some cases, initiate a new one. Who are the weaker holders getting shaken out in the handle?

Look Back Period

Day’s Range indicates the highest and lowest price at which the stock is traded throughout the day beginning from market open to market close. The best way to approach a stock chart is by looking at numbers and lines individually, understand what they represent, and study how they are connected to each other. It’s so much easier to just read a list of stocks that are best to buy and invest in, like this article we’ve put together. But what counts as the best stocks will be different for each investor and will be determined by each one’s goals. If you ever had a problem on how to read stocks, we’ll help you understand what numbers and lines mean, so you can decide what to buy and what to sell. Investor.com is not endorsed by or affiliated with the SEC or any other financial regulators.

To predict future stock chart prices, you must use the technical analysis of trendlines and chart indicators. Additionally, you should incorporate qualitative financial information, such as earnings, sales, debt, and growth. To understand stock charts, you must know how supply and demand work in a marketplace. The volume indicator and the stock price movement are the critical elements in effectively interpreting stock charts.

How To Read Stocks

Used widely in Japan and gaining a strong foothold in the rest of the world, the Japanese Candlestick chart gives an excellent insight into current and future price movements. Using bars is a step up from the line chart as it allows us to plot additional useful data on the chart. Here we have each bar representing a trading period with the price High, Low, and Close represented. https://www.bigshotrading.info/ Good to use when comparing the performance of many stocks on the same chart. We know that bullish patterns are expected to move up while bearish patterns are expected to move down, but the stock market is a volatile place, and we never really know what’s going to happen. Dividends per share – are small payouts of the company’s profits to the shareholders.

You can also see that there were stock splits in 2014 and 2020. A stock split is a strategic move done by the company’s board of directors to issue more shares of stock to the public. Knowing the lines of resistance can help you decide when to buy or sell a stock.


Typically, they’re investors who bought late, right at the end of the prior uptrend. When the stock sold off to form the left side of the chart pattern, they suffered a sharp loss. So as the stock nears that old high — and the weaker holders’ break-even points — they start to sell.

  • In the stock trading market, one of the most important pieces of information that indicates how much it is worth to invest in any of the stocks is the P/E ratio.
  • A stock chart is a graph that illustrates a stock’s movements over time.
  • The bid is the highest price an investor is willing to pay for a stock.
  • While not all act as true support or resistance, the ones that do tend to be critical as they can make or break a trend.
  • You can minimize loss and maximize profit just by looking at how it’s projected to perform.
  • The existence of a fiduciary duty does not prevent the rise of potential conflicts of interest.